Verizon COO Strigl: No Big Land Grabs Planned After Alltel Deal (VZ)

After its
$28 billion deal to buy Alltel, Verizon (VZ) is done shopping
for a while, at least in terms of "horizontal" deals to add more
breadth to the company's coverage areas, COO Denny Strigl said
today at Deutsche Bank's annual media and telecom conference.

Specifically, Strigl was asked if Verizon had any plans to expand
internationally into emerging markets, where wireless penetration
is relatively low and growth rates are high. Strigl said the
company has no immediate "plans" or "requirements" to expand
horizontally. But he says Verizon may partner with other
companies, where appropriate, or make "vertical" deals -- like
its acquisition of security firm Cybertrust last year.

Strigl also reiterated that the telco hasn't experienced any
broad, significant weakness from the U.S. economy.

Live notes:

12:44 Joining in progress: FiOS has a good growth trajectory:
Operating income positive next year, net income positive the year
after. Nothing has changed. Good FiOS growth into Q1, continued
focus on rolling out FiOS, on track to pass 12 million homes this
year, 3 million next, and on target for 18 million. Feel good
about wireless business.

12:46 Alltel deal isn't a "game changer" because don't think
there's anything that could throw VZW off its game. Ohhh burn!
Can't think of a better strategic fit than Alltel; had eyes on
for years. CDMA technology, closedly aligned distribution.
Anxious to get through regulatory process and move on.

12:48 Approval process: Plenty of precedent for transaction this
size. Do you think you can get it done in six months? Think so.
Alltel first time around closed in five months. Certainly a
different buyer, but Dobson-AT&T (T) also a good precedent.

12:49 Could see FCC departures. Does that change process as you
see it? What happens, happens. Change or no change, think we can
get it done by the end of the year.

12:50 How long do you think it actually is before Alltel
properties become as profitable as VZW? Cost synergies of $9
billion -- we have said we'll realize over 2 years. I don't see
anything in the way of that. Also think we have some good revenue
opportunities: Data ARPU for example. VZW spend about $3 more a
month than Alltel customer. VZW churn rate about 40 bps better.

12:51 What's happening to wireless in weakening US economy? We
are not seeing any significant impact on the economy. I'll
underscore the word significant. Of course there are pockets,
whether higher bad debt levels in some places in the Midwest, but
it's not anything that stops our overall game plan or causes us
to really think twice about it. On the enterprise, to be totally
candid, in financial services, we have seen some delay on
decisions, closing of locations, but overall impact on VZW has
been almost nothing.

12:53 FiOS overbuilding in Texas? No specific plans to build
anywhere other than in our franchise footprint. That isn't to say
that that's a forever strategy, but we have enough to do within
our own footprints where we don't need to seek out those
opportunities in the future. In Texas, where we have built out
FiOS, penetration well about 40% in some markets, have chosen
strategy to do "the next neighborhood over." Why not continue to
expand one block/neighborhood over, which is what we've done in
Texas.

12:55 How much does cellphone hardware fit into purchase
decision? Certainly Apple's (AAPL) iPhone has caused change in
industry, has caused customers to be more data-aware, look for
sexier phones. To the degree that it has, the industry has
benefited. VZW has sold more high-end phones after iPhone than
before. Talking up Verizon Voyager with QWERTY keyboard. Very
alert with what Apple does; certainly a trendsetter, but overall
I think we benefit from them.

12:56 Competition from cable companies in business market? Sure.
We see competition from cable everywhere. Doing best where we
offer FiOS. Doing worst where we don't offer DSL. Shows us that
FiOS strategy -- rolling out as quickly as possible -- is
something we need to make sure we do. And we're right on target.

12:58 Selling more CDMA-GSM just for outgoing? Can get Vodafone
(VOD) to sell too? Seeing more internationally that comes from
Vodafone. At the initial movement into the enterprise marketplace
with Vodafone. Focus on multi-national accounts with VOD has been
a bigger focus in the last 6-9 months than in the past. Very good
cooperation with multinational accounts.

12:59 Relationship with VOD is as always, strong. On operational
team we work very closely. Even moreso on enterprise. That hasn't
changed. Relative to change at the top of Vodafone, we've known
Arun for years. Back to the Airtouch days. He's been a very good
partner and I'm disappointed to see him go, frankly. We've also
worked closely with new CEO. He's a strong leader. We'll continue
to work closely with him. I don't see any change.

1:00 Talk about LTE upgrade? How fast? Every time we hear
question about timing or higher speed, I think it relates to
what's timing on rollout of higher speed technology. We will go
to market trials in 2009, toward the end. We will make out
product commercially available in 2010. Have had discussions with
infrastructure suppliers, so we have a plan. Confident that that
plan will come to fruition. How do you ramp up your data quickly
as you modeled decline in voice business? (Not sure you modeled
correctly!) 40% y/y growth in data, which hasn't slowed down. As
we look into 2009 and we layer open development with LTE, we see
some good upside.

1:03 Pricing wars on consumer broadband/video side? On non-FiOS,
are you pleased with DirecTV (DTV) strategy? We don't spend a lot
of time getting agitated over pricing wars. If you look at
wireless business, it has always been the price leader, and we
have always stressed the value. We are not the take-down market
leader and we have no intentions to be. Think we have a superior
product so we're careful on how we price the product. If
anything, we probably haven't taken historically as much
advantage of DirecTV relationship as we should have. Now have
emphasis on business of triple play with renewed strategy. I
think DTV feels the same about us. Think we had more adds in Q1
than in the past.

1:06 I don't lose a minute of sleep over WiMax. At the same time,
I think it is important to say that we will focus on the success
that WiMax has in the marketplace. I think it's a future
product/service, not something we worry about today. We'll watch
closely and adjust strategy as required but right now, we're not
all that concerned about.

1:07 Now showing T with bigger subsidies, etc. How competitive
would you get in wireless? We have been very consistent about how
we've told you about our cash flows in wireless. Not changing
what we've told you. Will there be price skirmish here or there
from time to time? Of course there will. Most recent was about
$99 unlimited plans. As we reported on Q1 call, this has been a
very beneficial plan for us -- can tell you today that from the
high end, we are experiencing quadrupling of gross adds, and
reduction of churn rate. Wasn't at all a price war and think it
was a good decision.

1:11 Age-old proven model that the rest of the industry has had
is now being adopted by AT&T and Apple. I don't see anything
that changes the game for Apple. They changed their own game; I'm
surprised it took this long.

1:14 Any thoughts about expanding into emerging markets?
Horizontally, no immediate plans or requirements to expand. If we
look at enterprise business, we think the best IP global network,
distribution around the world, comfortable with our position
today on a horizontal basis. That isn't to say that we wouldn't
seek opportunities to partner; where we could, we would consider
that. Vertically, we continue to look for opportunities like we
did a year ago in the security market. But beyond that, not much
more that I could add.

1:15 No current plans for wireless-to-broadband dual-mode phones.
Individuals use cellphones. They know they give the number out
for you to call them on the cellphone. Families use home phones.
I don't even know how to answer voicemail on home phone.

1:17 Economics of FiOS in MDUs. (Apartment buildings.) First off:
Ability to technically serve MDU? With things like bendable
fiber, we really have an economical way to serve MDUs. We're
going to pass it anyway. Ability to go after buildings and small
businesses. Will be in New York City later this year. Working
with DC, Philly, Pittsburgh, hope to have even further MDU
opportunities soon. Cheaper to pass a MDU and get that kind of
opportunity than it is a single family dwelling. Dependent on
more city franchises.

1:25 We have not abandoned DSL. Not thrilled that we've
advertised FiOS over DSL. It is what it is!